U.S. cattle prices up amid mad cow scare

Reuters News Service

Published
6:30 am CST, Monday, January 5, 2004

CHICAGO - U.S. cattle prices moved higher today as pending U.S. talks with Japan and Mexico raised hopes that America could start exporting beef again after the discovery of its first mad cow case in December.

The case stunned the $27 billion cattle industry and halted exports, which account for about 10 percent of sales.

Today, Japan, the top overseas market for U.S. beef, said it would send a technical team here to check U.S. mad cow safeguards. Washington said it has sent a team to Mexico to update officials there on the mad cow case.

"There is some optimism that we could start shipping beef again," said Jim Clarkson, livestock analyst with Chicago-based A. and A. Trading Inc.

Live cattle for February delivery at the Chicago Mercantile Exchange rose the daily limit of 1.500 cents a pound to at 75.300. That benchmark contract had closed at 90.675 cents on Dec. 23, before the U.S. Agriculture Department announced a Washington state dairy cow had been diagnosed with mad cow disease.

But trade news today added to already emerging beliefs that the worst of the mad cow fallout may be over.

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More than two dozen nations immediately halted U.S. beef imports, which accounted for about $3.2 billion in annual sales.

Analysts said it is that sudden backwash of beef supplies frozen by the import bans that had the market concerned.

"We have a world of beef that is backed up because of the export bans. To get through that, that will mean some fire sales to clear it. So the product is not through going down," said Bob Anderson, livestock market analyst at Commodity Services Inc in Des Moines.

U.S. wholesale beef prices have dropped about 10 percent since the mad cow case was reported as beef destined for export was diverted back into domestic markets.

Restaurant chains such as McDonalds Corp. have said consumer demand for beef has held steady amid the scare over mad cow disease, or bovine spongiform encephalopathy (BSE), a fatal disease caused by misshapen proteins called prions that can be spread by eating contaminated meat.

Outback Steakhouse Inc. said today that December sales at U.S. Outback restaurants open at least 18 months rose 2.5 percent during the five-week period ended Dec. 27. Tampa, Florida-based Outback has 825 locations worldwide.

But livestock analysts said the resilience of U.S. domestic beef demand, while encouraging, was not the main factor now.

"It is not as big an issue as exports are right now," said Rich Nelson, analyst at Allendale Inc. "Our take on the exports is they will not be opened up for at least two months."

A U.S. Agriculture Department team left for Mexico Monday to try to convince the No. 3 buyer of U.S. beef to restore imports. The top two markets, Japan and South Korea, have said it is too early to talk about resuming trade.

The U.S. government last week announced a sweeping set of measures to tighten regulations on the cattle industry and boost consumer confidence in U.S. beef at home and abroad. U.S. officials earlier said the infected Washington state cow had been imported from Canada, which also buoyed sentiments.

But analysts said mad cow fear still hung over the market.

"We feel we will have to have some type of progress on the BSE investigation before we see the markets move too much," said Allendale's Nelson. "There is too much uncertainty right now for the market to trade too much either way."